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QinetiQ Group plc First Quarter Trading Update

QinetiQ Group plc, the defence, security and aerospace company, today issues a trading update covering the period from 31 March 2015 to date, prior to holding its Annual General Meeting at the Pennyhill Park Hotel, London Road, Bagshot, Surrey, GU19 5EU at 11am today.

Trading during the first quarter was in line with expectations and the Group reaffirms its previous guidance for performance in the full year to 31 March 2016.

In the UK, the Government’s Strategic Defence and Security Review (SDSR) is now underway. The context for the SDSR was set by the “Summer budget” announced earlier this month in which the UK Government pledged to spend a minimum of 2% of GDP on defence in line with its NATO commitment. The specific allocation of the UK defence budget – including expenditure on test and evaluation, and science and technology – is unlikely to be determined until the SDSR is completed at the end of this calendar year. QinetiQ is well positioned to help customers meet the dual challenges of budget pressures and increasing global security threats.

The Group’s EMEA Services division delivered a solid performance during the first quarter. The division has seen some customer contract award decisions deferred due to the market factors outlined above, or delayed by the requirement for additional approvals, particularly on larger contracts. However, revenue under contract is as expected at this stage in the financial year.

The Group’s Global Products division has shorter order cycles and a more lumpy revenue profile than EMEA Services. As anticipated, it traded at similar levels to the prior year during the first quarter. A new leadership team is now in place in the US and is repositioning the business in response to continued challenging market conditions.

An additional £22m of the £150m share buyback programme was completed during the first quarter. At 17 July 2015, the Group had executed £130m of the buyback and expects to complete the programme in the next few months.

In balancing the continued market uncertainties with the strength of the Group’s operations, the outlook for the full year to 31 March 2016 is unchanged from the preliminary results on 21 May 2015 as set out below:

Defence transformation, and the forthcoming Comprehensive Spending Review and SDSR are expected to have an impact on the UK defence market this year. This will provide future opportunities for EMEA Services to build on its strong record of delivering ‘more for less’, whilst recognising that in FY16 there will be uncertainty and the potential for interruptions to order flow. The portion of revenue under contract at the start of FY16 was similar to a year ago and the balance is supported by a pipeline of opportunities but order flow and contract cover will be watched closely over the coming months. Overall, given the opening backlog position, expectations for the performance of EMEA Services in the current financial year are unchanged.

In Global Products, newer products are recording notable milestones and the amount of revenue under contract at the start of FY16 is up slightly on a year ago, but the drawdown of American overseas military forces is continuing to depress demand for conflict-related products. As the division has a lumpy revenue profile which is dependent on the timing and shipment of key orders, there is a range of possible outcomes for the performance of Global Products in the current year.

Notes for Editors:

A FTSE250 company, QinetiQ uses its world class knowledge, research and innovation to provide high-end technical expertise and advice, to customers in the global aerospace, defence and security markets. QinetiQ's unique position enables it to be a trusted partner to government organisations, predominantly in the UK and the US, including defence departments as well as other international customers in targeted sectors.